Supreme Court rules for Nike in trademark case

The Nike Air Force 1 sneaker, which was at the center of a trademark case. (Handout)

Nike Inc. won a victory at the U.S. Supreme Court barring a smaller rival from suing to void the company's trademark for its top-selling Air Force 1 sneakers.

Chief Justice John Roberts wrote for a unanimous court Wednesday that Nike's promise not to pursue an infringement lawsuit against Already LLC, maker of Yums sneakers, meant that the Texas company could not pursue its own trademark challenge.

"Already's arguments boil down to a basic policy objection that dismissing this case allows Nike to bully small innovators lawfully operating in the public domain," Roberts wrote. But the argument did not justify letting its lawsuit proceed, he wrote.

Wednesday's decision upheld a November 2011 ruling by the 2nd U.S. Circuit Court of Appeals in New York.

James Dabney, a lawyer for Already, did not immediately respond to requests for comment. Nor did Nike.

Wednesday's decision may help companies such as Nike rival Adidas SE and luxury goods makers Coach Inc and LVMH Moet Hennessy Louis Vuitton SA, which often sue to prevent alleged imitators from interfering with their revenue streams and customer goodwill.

The case began in 2009, when Nike claimed in a lawsuit that Already's Sugar and Soulja Boy shoes infringed Nike's trademark on the stitching, eyelet panels and other features of Air Force 1. Nike, based in Beaverton, Ore., launched the low-cut Air Force 1 sneaker in 1982 and sells millions each year.

After Already countersued to void the trademark, Nike dropped its lawsuit, believing Yums was not a commercial threat, and gave a promise in the form of a covenant not to sue Already.

But Already, based in Arlington, Texas, refused to drop its own case and accused Nike of dropping the original lawsuit to deprive courts of jurisdiction.

Roberts, however, said that allowing Already's lawsuit to continue would encourage companies to use litigation as a "weapon" rather than as a last resort to settle disputes, which could discourage innovation.

"Accepting Already's theory may benefit the small competitor in this case," he said. "But lowering the gates for one party lowers the gates for all. As a result, larger companies with more resources will have standing to challenge the intellectual property portfolios of their more humble rivals - not because they are threatened by any particular patent or trademark, but simply because they are competitors in the same market."

Roberts also agreed with Nike that Already was unlikely to produce any shoe that would not be protected.

"If such a shoe exists, the parties have not pointed to it, there is no evidence that Already has dreamt of it, and we cannot conceive of it," Roberts wrote. "It sits, as far as we can tell, on a shelf between Dorothy's ruby slippers and Perseus' winged sandals."

Justice Anthony Kennedy concurred in the decision, saying that other companies should not assume they can automatically end rivals' trademark cases with covenants similar to Nike's.